What happens if we find an asset we forgot to divide after the divorce?

The rule in Family Code section 2556

Section 2556 is a single paragraph, and it does three things. First, in a case for dissolution of marriage, nullity or legal separation, it gives the court continuing jurisdiction to award community estate assets or community estate liabilities that a judgment in the case has not already adjudicated. Second, it names the procedure: a party may file a postjudgment motion or order to show cause in the same case to have the omitted or unadjudicated asset or liability decided. Third, it sets the standard: the court shall divide the omitted item equally, unless it finds on good cause shown that the interests of justice require an unequal division.

The word "continuing" matters. The court does not lose its power over community property that the judgment never reached simply because the judgment was entered and the marriage ended. The request is made in the same proceeding, not in a new lawsuit.

Equal division under section 2556 mirrors the general rule of Family Code section 2550, which directs the court to divide the community estate equally, either in the judgment or at a later time if it expressly reserves jurisdiction to do so, except where the spouses agree otherwise in writing or by oral stipulation in open court. Section 2556 applies the same equal split to the piece that was missed.

What counts as an omitted asset, and what the statute leaves open

The section speaks of community estate assets and community estate liabilities. It covers debts as well as property. The Judicial Council's self-help page on property and debts warns that a couple may have more community property than they realize and gives retirement and pension plans as an example of what people overlook.

The statute is limited to the community estate. Separate property, such as an asset one spouse owned before the marriage or received as a gift or inheritance, is not what section 2556 divides, because, as the self-help guide puts it, in general each spouse keeps their separate property and the community property is split.

Several questions are not answered by the text of section 2556. It states no deadline for the motion. It does not say whether the reason the asset was left out makes a difference, and it does not define "good cause" or say what interests of justice would support an unequal split. Those questions are not resolved by the words of the section, and this post does not try to resolve them.

Omission is not the same as concealment

A forgotten asset and a hidden asset can look alike years later, but California law treats them under different chapters. Section 2556 reaches only what the judgment missed. Family Code sections 2120 to 2122 deal with something else: setting aside all or part of a judgment on the grounds section 2122 lists, which include fraud, perjury, duress, mental incapacity, mistake and failure to comply with disclosure.

In section 2120 the Legislature found that the division of property can be inequitable when made because of one party's nondisclosure or other misconduct, and that the public policy of finality of judgments must be balanced against the interest in a proper division of marital property. Section 2121 lets the court relieve a spouse from a judgment, or parts of it, adjudicating support or division of property, on the grounds and within the time limits the chapter sets, after the six-month limit of Code of Civil Procedure section 473 has run. Before granting relief, the court must find that the facts alleged materially affected the original outcome and that the moving party would materially benefit from the relief.

Section 2122 lists the grounds. Three of them concern a spouse who hid or misstated what the marriage owned:

• Actual fraud, where the defrauded spouse was kept in ignorance or otherwise prevented from fully participating in the case: the motion must be brought within one year after that spouse discovered, or should have discovered, the fraud (subdivision (a)).
• Perjury in the preliminary or final declaration of disclosure, in the waiver of the final declaration, or in the current income and expense statement: within one year after the perjury was or should have been discovered (subdivision (b)).
• Failure to comply with the disclosure requirements of the Family Code chapter that begins at section 2100: within one year after the failure to comply was or should have been discovered (subdivision (f)).

How the self-help guide describes the set-aside grounds

The Judicial Council's self-help page on the legal reasons a judge can set aside an order or judgment groups the section 2120 and 2122 grounds under one heading for divorce, legal separation and annulment cases. It describes actual fraud as being kept from information or from taking part in the case through fraud, describes perjury as the former spouse lying on purpose in the disclosure declarations or the income and expense statements, and describes the disclosure ground as finding out that the former spouse did not comply with the disclosure requirements. For each it gives the one-year deadline the statute sets.

The same page lists other section 2122 grounds that do not involve hiding anything: duress and mental incapacity, each with two years from entry of judgment, and a mistake in a stipulated or uncontested judgment, with one year from entry of judgment. It cautions that set-aside requests under these laws are complicated and have different requirements.

The practical difference for a reader is this. A request under section 2556 asks the court to finish a division the judgment left incomplete. A request under section 2122 asks the court to reopen what the judgment already decided. The statutes themselves do not say which one a person must use when an asset was left out because a spouse concealed it, and that question is beyond what this post can answer from the text.

Disclosure is the law that keeps assets from being left out

Family Code section 2100 states California's policy: a full and accurate disclosure of all assets and liabilities in which one or both spouses have or may have an interest must be made early in the case, whether the item is community or separate, and each spouse has a continuing duty to update it promptly when there are material changes. Section 2102 adds that from the date of separation until an asset or debt is distributed, each spouse owes the other accurate and complete disclosure of everything in which that spouse has or may have an interest or obligation.

Section 2104 makes that duty concrete. Each spouse serves a preliminary declaration of disclosure on a Judicial Council form, signed under penalty of perjury, identifying every asset and every liability with enough particularity that a person of reasonable and ordinary intelligence can tell what it is, with the tax returns filed in the two years before service. The petitioner serves it with the petition or within 60 days after filing, and the respondent with the response or within 60 days after filing it. The declaration is not filed with the court; only the proof of service is. A spouse may amend the preliminary declaration without the court's permission, and proof of service of the amendment is filed.

Section 2105 requires a final declaration of disclosure before or when the spouses sign an agreement on property or support, unless both waive it. A waiver is itself a statement under penalty of perjury that the preliminary declarations were completed and exchanged and fully updated, and each spouse acknowledges that noncompliance with the disclosure obligations will result in the court setting aside the judgment. The self-help guide names the form used to waive the final disclosure: the Stipulation and Waiver of Final Declaration of Disclosure, form FL-144. Under section 2106, a judgment on property rights is not entered until the final declarations are served or properly waived.

Section 2107 sets the consequences of falling short. The court must impose money sanctions on a spouse who fails to comply with the disclosure chapter, including reasonable attorney's fees, costs or both, unless it finds substantial justification or that sanctions would be unjust. And with the exceptions that section describes, if a court enters a judgment when the spouses failed to comply with all disclosure requirements, the court shall set the judgment aside; the statute says that failure is not harmless error. Section 2105 lets the court limit a set-aside for failure to comply with that section to the portions of the judgment the nondisclosure materially affected. The self-help page on sharing financial information puts the risk in plain terms: a spouse who hides information or leaves things out could lose some property or be ordered to pay the other spouse's attorney's fees.

What this means in an agreed divorce

In an uncontested divorce with a written settlement agreement, the judgment divides property on the terms the spouses agreed, which section 2550 permits in place of the equal division the court would otherwise order. An agreement divides only what it names. A thorough preliminary declaration from each spouse, updated when something changes, is the record of what the marriage owned, and, except by court order for good cause, section 2105 requires a final declaration, or a waiver, before or when the spouses sign an agreement on property or support.

If an item still surfaces after the judgment, section 2556 gives the court a way to divide an item the judgment did not adjudicate. A motion under section 2556 or a set-aside motion under section 2122 is filed in the same case after the judgment and is decided by a judge; it is not part of the agreed judgment itself.

In an agreed divorce, the declarations of disclosure each spouse serves and the written settlement agreement are the documents that name the community assets and debts. Law Offices of Rozsa Gyene prepares and reviews every document in that kind of case for a flat fee, as a limited scope engagement under California Rules of Court, rule 5.425, and it represents one spouse only. Its client does the filing, using written filing instructions reviewed by the attorney. The office takes no part in filing or service, makes no court appearance, supplies no notary, and neither prepares nor records deeds. Rozsa Gyene, State Bar of California No. 208356, 3500 W. Olive Ave., Suite 300, Burbank, CA 91505.